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Coinbase Investigates Insider Trading Soon After Announcing Support for Bitcoin Cash

Coinbase Investigates Insider Trading Soon After Announcing Support for Bitcoin Cash

Coinbase Investigates Insider Trading Soon After Announcing Support for Bitcoin Cash

The CEO of Coinbase, the biggest USA cryptocurrency exchange, said the company is conducting an investigation into unusual trading activity that preceded its distribution of Bitcoin Cash on Tuesday evening. Historically, the price trend of bitcoin has had an inverse relationship with the short-term performance of alternative cryptocurrencies.

Bitcoin Cash first surfaced online back in August when a group of developers "forked" the Bitcoin blockchain.

However, many exchanges, including Coinbase, initially refused to support the innovation, casting doubt on its prospects. They were also set to look into why the price rose before the Coinbase support announcement was made. The announcement seemed to trigger a flood of cash from bitcoin to Bitcoin Cash, which surged 50 percent overnight.

In theory, Coinbase's staff, who were in the know that it was about to add Bitcoin Cash to its exchange, could have profited by buying the cryptocurrency on other exchanges.

In a post on Medium, he elaborated: "We've had a trading policy in place for some time at Coinbase".

Coinbase has yet to give a full explanation but has said that it intends to reopen Bitcoin Cash order books later on Wednesday. The fact that the price of the cryptocurrency was rising in the hours before the announcement could be a sign that people were trading based on insider knowledge.

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The allegation from some critics was that Coinbase staffers could have purchased Bitcoin Cash - or BCH - on other exchanges at a lesser value - all the while knowing it was about to open for public trading.

Moreover, "employees and contractors (of Coinbase) were explicitly prohibited from trading Bitcoin Cash and disclosing launch their plans over a month ago", stated Brian.

Armstrong notes that Coinbase has strict confidentiality policies and doesn't allow for insider trading. The policy prohibits employees and contractors from trading on "material non-public information", such as when a new asset will be added to our platform.

Bitcoin's total market capital can be estimated at $59bn which makes it the third largest crypto-currency in the world.

Others on Twitter, however, came to Armstrong's defense and said the CEO was clearly not complicit in any insider trading activities.

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